Emergent Research

EMERGENT RESEARCH is focused on better understanding the small business sector of the US and global economy.

Authors

The authors are Steve King and Carolyn Ockels. Steve and Carolyn are partners at Emergent Research and Senior Fellows at the Society for New Communications Research. Carolyn is leading the coworking study and Steve is a member of the project team.

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Emergent Research works with corporate, government and non-profit clients. When we reference organizations that have provided us funding in the last year we will note it.
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Assistant Edge

March 26, 2013

The Rise of Small Business Crowdfunding

I had the opportunity to moderate a panel on alternative financing methods at the Global Coworking Conference. While we covered a lot of topics, the audience was clearly most interested in crowdfunding.

Crowdfunding, which is raising money by getting getting small donations of money from a large group of people, is hot.

In addition to funding projects and products, lending is also being crowdfunded.

SoMoLend, for example, matches businesses that want to borrow with investors who want to lend.

It's also likely that small businesses will be able to crowdfund equity investments starting later this year. The Jobs Act, which was signed into law last year, legalizes equity crowdfunding. The SEC and other agencies are currently working on the rules, but expect to see equity crowdfunding in the coming months.

We think the crowdfunding of loans and equity will work best for "friends and family rounds". Using crowdfunding platforms will cut the legal costs of early stage rounds and formalize them. This will be a big improvement over the "hand shake" agreements we often see in the small business funding arena.

Despite crowdfunding being a hot trend, few small businesses consider it a potential source of capital. According to a recent survey, only 3% of small business owners thought they would benefit from it.

Our advice to small businesses is to familiarize yourself with crowdfunding and evaluate it's use as a capital source for your business. It's quickly becoming an important source of small business capital.